Prof G Markets - Bond Investors Are Panicking — And They May Be Right

Episode Date: May 25, 2026

Scott Galloway and Ed Elson break down why bond yields are spiking — and why stock investors should take note. Then they dig into the SpaceX IPO filing and explain why the valuation is completely overblown. Finally, they discuss James Murdoch’s deal to acquire parts of Vox Media, and what it means for Prof G Media.  Get your tickets to the Prof G Markets tour  Subscribe to the Prof G Markets Youtube Channel  Subscribe to the Prof G Markets newsletter  Order "Notes on Being a Man," out now Note: We may earn revenue from some of the links we provide. Follow the podcast across socials @profgmarkets Follow Scott on Instagram Follow Ed on Instagram, X and Substack Send us your questions or comments by emailing [e-mail] Learn more about your ad choices. Visit podcastchoices.com/adchoices

Today's number 15. That's a percentage of Americans to say they'd be willing to have a job where their direct supervisor was an AI program. Ed, true story. My first boss died an untimely death, and I went to his funeral with an open casket, and I leaned over and said, who's thinking outside the box now, Randy?

How are you, Ed? I'm doing well. Doing well. Very excited for our show happening. In two days, we're heading to San Francisco to kick up the property markets tour with a fully sold-out show. I can't wait to go live for the first time.

Tickets are still available for L.A. this Thursday night, by the way, Netflix's co-CEO, Ted Sarandos, is joining us there to break down the future of media. He's going to tell us whether Hollywood is dying or if it isn't dying or how it isn't dying. I'm sure that'll be an interesting and spicy conversation. And then we've also got Miami, which tickets are still available for on Saturday night,

and then on Chicago on June 1st. We are speaking with Governor J.B. Pritzker. It's happening. it's finally here. I can't wait. This is our big moment. The moment's arrived. And I just found out that literally, I'm not exaggerating.

When people ask me who my role model and hero is, I mentioned this person, and I found out literally 30 minutes ago that this person is a fan of the show and is going to come to one of the shows and be an on-stage guest. And I'm not allowed to say for security reasons, but this person is going to show up to one of our shows.

So I'm just super, and being on stage guest, so I'm just super excited. We're not going to reveal who it is, and we're also not going to reveal which city that individual is going to arrive up. But all you do need to know is the thing that Scott that just said, which is that if we were to reveal it, it would be a problem for security reasons.

I mean, boom, you got to buy a ticket. There you go. Which city are you most excited about it? You know, I was L.A., But I'm increasingly excited to end the tour in New York with the mooch and just sort of celebrate in our hometown. By the way, the Knicks are going to be playing as well. Nicks are in the conference finals.

There's just a very positive, exciting New York City energy going on right now, and we're going to ring that bell live in New York at Town Hall. So I was kind of excited about L.A. because L.A. feels sexy and cool in Hollywood. I still am. I'm slowly kind of getting more excited about New York City. What about you? I would say L.A.

Because a lot of my friends from college are coming, and that's nice for me. That will be nice. Yeah, probably L.A. Very exciting. Well, if you want to get the tickets, head to PprofitMearkets Tour. We can't wait to see you there. We'll see you very soon. Shall we get into the show, Scott?

Let's get into it. Now is the time to buy. I hope you have plenty of the world of all. Inflation fears drove the yield on 30-year treasuries to its highest level since 2007 last week. And surging yields weren't just an American story, 30-year bond yields in Canada, Germany, France, Spain, Portugal, the Netherlands, and Switzerland also hit 12-month highs. A big part of the spike is owed to war-driven inflation, and the resulting probability that the Federal Reserve may need to hike interest rates sooner rather than later on Calci, the odds of a Fed rate hike before. four-year-end have climbed from around 15% a month ago to above 40% last week. So it appears, Scott, that the bond market is finally reacting to inflation in a serious way. The 10-year yield

hit almost 4.7% its highest point since January of last year. As I said, 30-year yield hit almost 5.2% on Tuesday. Its highest level since July, 2,000. this is what HSBC is calling the, quote, danger zone, meaning that yields have risen to levels where they will actually start to cause some stress in other parts of the market. This is why it's important for investors to be aware of what's happening in the bond markets. Meanwhile, Bank of America just published a survey. They found that 62% of fund manager respondents expect that 30-year treasury yields will hit 6% this year. If we hit 6%, that would be the highest level since since 1999. In other words, despite the relative calm that we've been kind of analyzing in the

stock market and trying to understand, what we're now seeing is that bond investors are looking at inflation, they're looking at our prospects in the Middle East and Iran, what gas prices and oil prices will do to overall inflation in the rest of the economy, and they are, as a result, freaking out. That is what we're seeing with yields. Lots to get into here. What are your initial reactions. Well, the term we used when this tariff nonsense went crazy and he backed away was that that it ends up that the bond market is the adult in the room and was last April with tariffs. And now it appears that the bond market is sort of unfortunately, not unfortunately, putting pressure on Trump's decisions. What that results in, though, is that every time I

I hear President Trump threatening the IRGC in Iran, it's so obviously he has no cards to play because he desperately wants out, but he can't get the terms he wants unless there's a credible threat that he's going to stay. It's literally the definition of a quagmire. Because right now, the IRGC is supposedly rebuilding. They've survived. So their attitude is, this guy's telling his party in the nation that this was supposed to be over four weeks ago, his popularity, is plummeting, he desperately wants out, but he, quote, unquote, is threatening to do more. So the bond market has stepped in and said, okay, with energy going up, we have greater inflation, which is pushing bond yields up and increases the odds of the federal raise rates. Typically, when the bond market

goes up, it draws market money out of the equity market because people can get a better yield with what they feel is a safer investment and also fewer deals get done because it gets more expensive to buy things, it gets more expensive. You know, everything in the economy, your auto loan, your mortgage, your credit card goes up.

And the yield on the 10-year treasury kind of sets the bar for interest rates across the economy, right? And higher yields also increase the cost of servicing our debt. In 2026, you also spent a trillion dollars on interest payments. That's $88 billion a month,

roughly what we spend on the fence. and education combined. And Neil Ferguson has named this Ferguson's law. Any great power that spends more on debt service than defense starts to decline. And then the question is, could this trickle down to software and AI who've taken out private credit loans? Private credit loans are typically floating rate.

So what happens when the AI shell companies that are built on debt, what happens when their debt service costs go up, and then they hit a bump in the road where their capbacks continues to go up, but the revenues don't scale in line with their CAPEX, which, according to the FT and every other analysis I've read, says it'll be nearly impossible for revenues to keep up with CAPX at AI companies. So you could have shavings of shit on a shit salad here, right? You could have costs go up, so consumers take their spending down, and then the companies that are most levered or who have been tapping the credit markets see their costs explode while maybe registering

a decline in revenue growth that can't, you know, there's no way they can live up to their expectations. So, you know, we keep saying the deficit doesn't matter until it matters. It feels like that mattering may be starting. Yeah. And it all goes back. I mean, I'm glad that you lay out some of the downstream effects, or maybe we call it sort of the chain reaction that happens as a result of inflation, because this relates to our conversation last week, which is that rising inflation has generally been almost ignored by equity investors. Investors don't seem to be that worried about the inflation. And there are all these reasons and these arguments as to why inflation doesn't really matter, and some of them are quite compelling. But, you know, when you

kind of model this out over the long term, and you think about what rising prices actually means for all of the other parts of the economy, we had inflation, which rose to 3.8% last month, the PPI rose to 6%, gas prices are up more than 50% year-over-year, airline fares are up more than 20%, etc., etc., etc. One of the main implications of these rising prices is that it probably means that we will have a rate hike from the Federal Reserve this year. And in fact, if we look at the odds on Kalshi, the chances of a rate hike have risen to 40% at the beginning of the year. Those odds were less than 10%. You'll remember heading into the year, we thought we were going to have a rate cut. In fact, the odds of a rate cut on Calci again at the beginning of the year were 96%.

We just assumed that this was going to happen. And so what happens when you do hike rates, which it increasingly seems that that's potentially going to happen here, or at least as a very real possibility getting closer to a probability, it means that you just have higher interest rates across the board. It means that consumers are spending more on their interest payments, on their mortgage payments, on their auto loan payments. And then, as you mentioned, the cost of debt rises for companies too. Everyone has to pay higher borrowing costs. What might that do to earnings? What might that do to earnings expectations? What might that do to the AI buildout?

Which, to your point, is increasingly dependent on debt. We look back to October of last year. AI-related debt ballooned to more than a trillion dollars, as you point out. A lot of the private credit in there is floating rate debt, which means that if the interest rates rise, that it's going to cause real problems for the servicing costs of the AI buildout. And so we can see how this all kind of funnels down

through the economy and results in the thing that investors are very worried about and don't want to happen, which is stock prices go down. I just think that this is becoming more and more a possibility closer to a probability. And it seems to me that investors are kind of down playing the negative impacts of inflation, specifically on stocks. And I've been wondering about why that is, like, why aren't investors as worried as you might think that we're seeing

historically very, very high inflation that doesn't appear to be set to come down anytime soon? Again, we've had no indication that this war is going to end because every time Trump says it's about to end, two days later he reverses course. And that's happened probably like seven or eight times in the past few weeks. So I've been thinking, like, why aren't they worried? One idea that I have in my head is maybe they're just optimistic by nature. Maybe that's just what it means to be an investor. Your default setting is things will work out.

It's a better bet to just bet on the outcome being a good one, because as we know, you don't make that much money shorting the market. You certainly don't make much money not being invested in the market. That's one reason. The other reason, though, is I wonder if inflation has just become inherently politicized. And the politics are skewing investors' perspective, where to believe that inflation is an actual problem, is to believe and to admit that Trump made a mistake, that he, one, shouldn't have raised tariffs, as an example, but two, that he shouldn't have raised tariffs as an example, but two, that he shouldn't have attacked Iran, that he shouldn't have invaded the Middle East, or at the very least, that his

strategy in doing so was a fumble. But I wonder if investors just don't want to admit that, and we should be clear, we see this from investors on the left and from investors on the right, but it seems it's happened to such a degree where to admit that we're seeing structural issues in the economy is to admit that the president, who has become this sort of larger-than-life personality in the minds of many investors is wrong about something, that his strategy was flawed. And I wonder if that's inherently pushing investors to try to downplay or ignore or put their blinders on and think, no, it's not a problem, everything's fine. Yeah, we'll just leave in a couple weeks. Yeah, it's going to be okay. And that might be a real problem over the long time.

It seems that the bond investors have decided, no, this is a problem. But over in the stock market, you're not really seeing that. So despite the fact that I worked in fixed income, I always have a difficult time other than saying your auto loans are going to go up, trying to explain why interest rates are so important for the economy. And so the first thing, the first thing that happens when interest rates go up is that the first casualty is speculation. And so growth companies which have been driving the market, right,

94% of the S&P gains have been from AI companies or AI-related companies, and it's all about growth. And essentially, these companies aren't making a lot of money right now, but their potential because they're growing so fast is that in five, 10 years, they might be generating more top-line revenue than Microsoft. But revenue five years out with higher interest rates means that that revenue isn't worth as much now. So growth stocks get hammered because they're all about, projecting huge cash flows in the future, which when reverse engineered or valued back to, you know, a dollar in 10 years when interest rates are 2% is worth, you know, 90 cents now, a dollar at interest rates of 6% in 10 years, you know, is worth 45 cents or 55 cents, right?

So it just, the speculative stocks get crushed, right? So translation, the economy, you know, the fantasy economy goes into recession first. Housing gets hit next. Monthly mortgage payments explode. Affordability collapses. And this really, as most economic shocks, takes a toll on the people who can't afford to pay cash for their house. So first-time buyers, young people get especially hard hit. It also hits leverage. So private equity, commercial real estate, regional banks, anything to be. dependent on rolling over cheap debt starts sweating, right? And then consumers finally pull back because of credit card debt, auto loans, and financing costs suddenly become real instead of background noise. And businesses cut hiring, laughs follow,

and you kind of enter into this little bit of a doom loop. But the reality is, and this is why capitalism is just such a gorgeous organism, rate spikes are painful because they're supposed to be. They're kind of the economy's way of destroying excess, repricing risk, and reminding everyone that capital actually has a cost. It's basically the ruler wrapping on the knuckles of the Trump administration's reckless economic policy and waking people up from this fever dream that AI is going to create

10 different Microsofts in the next 24 months. It's the alarm clock going off saying, no, you know, your dreams are over, my friend. It's the cold shower that we've all been needing to take for a while. Which would be just devastating to the markets if that were to actually transpire. And I think, I mean, you made the point about how the bond markets, going back a year ago to Liberation Day and the tariffs, the bond market was the adult in the room. Trump issued these tariffs.

came out with his stupid billboard in the garden and everyone freaked out, stock market investors freaked out, bond investors particularly freaked out where you saw the 10-year yield jumping more than 50 basis points in three days. It was the biggest three-day jump in more than two decades. It was huge. And Trump admits, oh, the bond market's freaking out here. And then he tacos, and he puts the tariffs on pause. And the learning from that was, okay, the bond investors, the bond vigilantes, as they call them, they're the ones who are going to sort of steer Trump's sort of wacko policy in the right direction.

If he starts to do things, they're going to have real serious consequences in the markets. So the question then becomes, like, is the same going to happen in the current situation? Will bond yields today change Trump's economic policy like he did with the tariffs? The trouble is, the new policy is a,

war in Iran, which is a lot more difficult to just turn off. I mean, we've already spent, I mean, according to Pete Hegsef, more than $25 billion on the war, that was a month ago that he said that, so it's probably a lot larger. Trump's already requested $1.5 trillion for the defense budget for next year. We've already lost 13 lives, nearly 400 wounded. Many other lives have been lost. I mean, the costs here are a lot more significant and a lot more personal, a lot more sensitive. And so the idea that the bond yields are going to go up and then Trump is just going to be like, okay, I'm going to turn off this war and we're going to open the straight back up and just concede defeat to Iran. That's just not going to happen.

So the difference between today and last year is that you don't have that same wrapping on the knuckles mechanism, as you just put it. Because there's so much more to lose here. It's so much harder to get out of this one. As you say, it's a quagmire. That wasn't the case with the tariffs. So I just, I wonder if we're actually in potentially a more difficult situation than we were last year, where it was kind of easy to steer him in a certain direction. But with this, when it's a hot war, when you're firing weapons, firing missiles,

when you're sending ships over, physical ships over to attack a nation, and now we're in the midst of this thing, I'm just not sure that the bond markets have the power that they used to have, which to me suggests that yields will only continue to rise, which increases the likelihood that all of those dominoes will fall in the way that we just laid out. So this is something to certainly keep an eye on. I don't think it's, we should ring the bell right now and call it, okay, now the bear market's

going to happen. I don't think that's the right takeaway. But certainly what we should be doing is keeping a very close eye on those bond yields, keeping a very close eye on inflation, and understanding I'm being realistic about how long will we stay in Iran, how long will the straight continue to be blockaded? Because that is the thing that is driving all of the inflation that we're seeing, not just America, but around the globe. and why you're seeing those bond yields rise in other nations as well.

The low rates not only create the illusion of prosperity, they create the illusion of genius. Yeah. And that is, okay, my economy is doing great. I can spend $7 trillion and $5 trillion in receipts and juicy economy and keep stock prices high. And then all of a sudden, what you find out is, do you have a real economy, do you have sensible economic policies,

and do you have a real business? And, you know, I hate to say, And unfortunately, again, it hits earners more than it hits owners because if you own real estate, the wealthiest people in Argentina really haven't changed much because despite massive inflation, the people, the wealthy families there bought land and they bought hard assets. So inflation hits earners. It hits people because typically during inflationary periods, wages don't keep pace with the cost of goods, so everyone's prosperity goes down.

Whereas owners, if inflation goes up, then asset values go up, typically. Not always, you know, sometimes if you have stocks, they get hit hard. But inflation is, it really attacks the society because one of the things that one of the myths about society is that everyone talks about unemployment, that when people aren't working, they get antsy and angry. And that's true, but where they get violent or chaotic is when they're working and they're still hungry. And that's what inflation does. It attacks your prosperity where you feel like, okay, I'm working two jobs and I can't afford. I can't afford to buy diapers.

And that's exactly what we saw last month where wages, real wages, fell because inflation outpaced wage growth. And it's likely that that's going to continue. We'll be right back after the break. And by the way, we will be taking a break from the feed while we travel for the tour. But tune in on Friday for our show live from San Francisco. Support for the show comes from Delete Me. Have you ever thought I should really be doing something to protect myself from stalkers, scammers, and hackers, but you're not sure what? Here's what you can do. Go to join DeleteMe.com slash Profji and enter code PropG. You'll get 20% off, Delete Me. Delete Me removes your personal information that's being sold online. You can get an individual plan for a little over $8 per month. Discounts get even better with a two-year plan or when you enroll with your partner or family. Our producer Jennifer Sanchez tried Delete Me and here's what she thought. I've really enjoyed Delete Me. I think what stood out is the ongoing support. I still get regular reports showing where my data is showing up and they handle everything. I don't even have to think about it.

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We're back with Profi Markets. One of the most anticipated IPOs in years is finally happening. SpaceX officially filed to go public last week, giving investors their first detailed look at the company's financials ahead of the company's planned debut on June 12th. The company is reportedly looking to raise at. at least $80 billion, which would make it the largest IPO in history. And it could be just the beginning of a major wave of blockbuster offerings, with Open AI also reportedly preparing to file in the coming weeks. So, Scott, the SpaceX numbers are finally out. I cannot wait to dig into this with you. Let's just look at 2025 revenue, $19 billion, Q1 revenue, $5 billion,

$1 net loss, $4.3 billion. So much to talk about here. Where do you want to start? I want to start with the ayahuasca trip. So the first 14 pages of the S-1 include pictures of rockets. AI was mentioned over 1,200 times in the S-1. For context, it's longer than the Great Gatsby or the Catch on the Rye. And here are some direct quotes from the filing.

These are my favorite. We do not want humans to have the same fate as dinosaurs. Well, thank God you're here, Elon. For decades, this is another quote, for decades, a reality where humanity travels between the planets and the stars has felt tantalizingly close, but still locked in the pages and screens of science fiction.

Okay. The sun contains approximately 99.8% of the solar system's energy, and as a result, we believe it is the only truly scalable solution to terrestrial energy constraints in the age of AI. Jesus Christ, put the fucking place. type down, we believe the next paradigm shift for humanity is the creation of a resilient,

perpetually expanding space-faring civilization, ultimately preparing us to Kardeshev, type 2 status, defined in the filing itself as a civilization that harnesses the full energy output of the sun. Okay, now give me $1.8 trillion. And effectively what you have here is you have a core business that is genuinely, excellent. Starlink generated 3.3 billion in revenue in the single quarter with 1.2 billion in operating income. That's a 36% operating margin on a monopoly satellite internet business with no serious competitor in sight. Let's give them that. If this were the whole company, it would be one of the great businesses of our era. Yes. But it's not the whole company.

Stapled onto this rocket ship is XAI, a business that is clinically successful. speaking, a money furnace. In 2024, X-AI lost $1.6 billion on $2.6 billion in revenue. By 2025, losses ballooned to $6.4 billion on $3.2 billion in revenue. Revenue went up 22%. Losses went up 310%. And by the way, just to interject there, let's look at first quarter of 20206, the AI units losses for one quarter alone are up to $2.5 billion. So if we're going to annualize that out, we're up to $10 billion, but of course it's going to be even more because it's actually growing exponentially. You look at the net loss for the whole company for the first quarter of 2026, their losses

grew by 700% year over year, in one year. So these losses are insane, like totally, totally absurd. And to your point, it's not coming out of the connectivity business, which is the satellites. That is a profitable business. That is a great business. Starlink is amazing. We've said that for a long time. It's coming out of one, the space unit, which, by the way, it's not that bad.

It's a $600 million loss in Q1, but mostly it's coming out of AI. AI is the money incinerator in this business. It has gotten way out of control. And it's all because he's decided to merge that company, fold XAI into SpaceX, which is, as you say, sort of the bag of shit that's been stapled to the actual business in order that he can command this ridiculous valuation.

Or find that cheap capital needs to continue to be the money furnace. Yes. In Q1, 2026 alone, net loss of 4.3 billion, on 4.7 billion in revenue, total cap-ex 10 billion in the last 90 days. 7.7 billion of that was for AI. Cash on the balance sheet cratered from 25 billion at the end of the year to 16 billion by March 31st. So they burned $9 billion in cash in a single quarter. That's $100 million a day. So I don't even see them as investing in the future at this point. They're kind of, it's like the future is billing them in advance. And total debt on the balance sheet is $29 billion.

I mean, this is a great company. It was a great company. It was, and then they stapled X-A-I into the thing, and now it's a bullshit company. Well, let me bring this back to me. When my mom, after my parents split up, and my mom was living in Westwood, my mom was trying to find, you know, the next dude and the next guy, and she used to date. And I physically remember opening the door, my mom would go to dances, and she'd meet somebody, and they'd want to take her on to date. And someone would knock on the door, and I'd open it, and be a man, and they'd see a man, and they'd see. an eight-year-old kid, and I could physically see them, like, be uncomfortable and

disappointed. And this is hard for me, Ed. This is very hard for me. I wanted a new daddy so badly, Ed. Anyways, this is, you meet Snow White, and you're like, this is going to be amazing, you know, SpaceX. And then you find out the seven dwarves are just these awful psychopathic borderline maniac children. I don't like this analogy. You're not ex-a-I. So Snow White is SpaceX. But the dwarves are, you get the dwarves too.

And the dwarves are Chucky and Cujo and these companies that where he is trying to use the unbelievable moats and technical sophistication and monopoly power of SpaceX, to find cheap capital such that he can catch up to open AI, which he's still fucking furious he gave up ownership in. And then my favorite part, my favorite part is that, my favorite line in this whole thing, the favorite, the Easter egg here was that it came out in the S-1, that he bought $131 million.

He spent $131 million of the company's capital, to purchase recalled trucks. Basically, he spent $131 million to buy back cyber trucks that were recalled. How's that going to help SpaceX shareholders? So if you look at the valuations here and you compare it to, even if you said XAI was worth as much as open AI on a multiple basis, If you took Starlink and compared it to the best telco, and you took the rocket company and compared it to another rocket, and you come up with about $600 billion in valuation, let's double it because of the Elon effect. That's $1.2 trillion. But this is, and our buddy Oswatta motorans valued the thing at about $1.2 trillion. But they're talking about, they're leaking that they think it's going to go out of $2 trillion. I don't think so. That's the problem.

What happens in a company like this over time is that people find the shittiest asset and assign that valuation to the whole thing. In addition, every telco, and this is kind of a company, a telco attached to a rocket, those companies ultimately, their earnings growth have trouble keeping up with their CAPEX demands. So this feels like a company, an amazing company with, like you said, bags of shit strapped onto it, at a valuation where they're assuming everything has the, the same potential and luster of the core property of SpaceX. And the bags of shit are designed to inflate the valuation of the company. And indeed, that is what they have done, because they're going to raise $80 billion and they're going to target a $2 trillion valuation. And let's just look at what that valuation actually means.

We know that they generated $19 billion or a little less than that in 2025. So this means that this company is valued 106 times sales. I just want to compare this to Nvidia. By the way, their Q1 revenue, which was $4.7 billion, the revenue grew 15%.

So this company is the next hot company it's growing at 15%. And it's valued at 106 times sales. Let's compare it to Nvidia. Nvidia just reported their earnings. They grew their revenues by 85%. They generated $58 billion in net income.

That's gap, net income, up 211% year over year. They are trading at less than 22 times sales. So the multiple, there is a 5x difference in that multiple, despite the fact that Nvidia is growing more than five times as fast as SpaceX and also it's generating billions of dollars in cash flows. This is a losing money business. And now let's compare it to some of the other previous hot IPOs that we've seen

when they've gone public. Meta, when it went public, it was growing at 88%. It traded at 28 times trailing revenue. Google was growing 240%. It traded at 10 times trailing revenue. Saudi Aramco, maybe we don't want to make the comparison, but let's just make it anyway, traded at five times trailing revenue. And it was growing faster than SpaceX. This is the thing that I don't think people really understand here. Now that we know these financials, this company's business actually isn't growing very fast at all. 15%. in the world of AI and the world of big tech is nothing. You cannot be demanding a $2 trillion valuation,

which would make it the seventh most valuable company in the world. It's going to be more valuable than META, Broadcom, Berkshire Hathaway, and its revenues are going to be lower than Macy's. So I'm not taking a dig at the business itself, and I think it's cool that we're building rockets, and I think it's cool that we're trying to go to space. but the idea of asking for $2 trillion is completely insane, not even a debate, not even a conversation.

That makes actually no sense at all. But the reason they're going to get away with it is because they're going to sell the Elon story to the retail investors because they've reserved 30% of the allocation for retail, which is about three times higher than the average IPO, because they know that they have to sell this to the Elon fans who will pay whatever price because they don't care

what the financials actually say. They just love Elon and they think that we're going to go to Mars. I hate to sort of patronize them, but I'm sorry, that is the reality of what's happening here. You cannot argue that this valuation makes sense. If you reduced it to maybe one trillion dollars

or lower than that, reduce it by 60%. Maybe we can have a conversation about whether this is a reasonable investment that makes any sense at all. But at $2 trillion, like now that we know the numbers, Very clear here. Stay away from this thing. Do not invest at a $2 trillion valuation. It makes no sense at all.

So Palantir has the highest trailing price to sales multiple in the S&P 500. It trades at 67 times sales. Number two is crowd strike at 34 times sales. At a $1.8 trillion valuation, which is the low end, supposedly, of their range, that they're targeting. SpaceX would be trading at 94 times trailing 12 months revenue. And like you said, the valuation just makes no sense. If you look at the sum of the three business lines, space, connectivity, and AI, and assume that each segment will command a multiple that is twice what their competitors are at, you get to $1 trillion. So the bankers here are tasked with telling investors that the total addressable market is the size of the entire U.S. economy, $28 trillion. By the way, that was my favorite quote from the thing. They said, quote, we believe we have identified the largest actionable total addressable market. in human history.

And then it's a giant bar that's $28.5 trillion. And as you say, that's the GDP of America. Like, that's the pitch. And that's what's going to get. And the sad thing is, I think it's actually going to work. But that's how they're getting there with this, like, dumb hand-wavy. I mean, it's very we-work, which you're an expert in. Well, we work, to be clear, we work didn't have a great business.

but some of the, some of the, you know. But the feel of the messaging. Yeah, let's take mushrooms and elevate the consciousness of the world and the planet. There's a lot of that. I don't know. And this company gets out, but I'm, and I've been so wrong on Tesla and must companies. But I just wonder, is there enough cultists to show up for this thing at $1.8 trillion? That's the question.

Are there enough people that are just, you know, suspend, suspend disbelief just to pile into this thing because they think, oh, musk, it's musk. The numbers aren't going to do it. This is what we've learned here. We finally have the numbers. We now know the numbers are not very good. It's all hope and hype. Is there enough? We'll be right back.

And there's still time to get tickets for some of our tour dates. head to profity markets tour.com to secure your seat in L.A., Miami or Chicago. We hope to see you there. Hi, I'm Maria Sharpova, host of the Pretty Tough podcast. Each episode, I sit down with high-achieving women to discuss the pursuit of excellence without apology. This week on the show, comedian and best-selling author Chelsea Handler gives her tips on independence and aging gracefully. I would argue that 50, now that I am 50 and I understand life more than I did when I was 30 or 40, is that you get so much more wisdom and you get so much more experience that you actually feel like you're beginning again. Check out Pretty Tough, new episodes on Wednesdays.

You can watch it on YouTube or listen in your favorite podcast app. This week on Networth and Chill, we're joined by Danielle Robe, the journalist Forbes called The Queen of Questions and the host behind Reese Witherspoon's Book Club podcast and her own show, Question Everything. We're exploring a skill that can transform your career, relationships, and bank account, knowing how to add. the right questions. Danielle breaks down the art of getting real answers in professional settings from coffee chats to career pivots and shares the money conversations we should all be having but aren't. Get ready for hard-hitting advice on defining success beyond the dollar signs, asking better money questions with partners and friends, and the mindset shifts that separate people who stay stuck from people who keep growing. Listen wherever you get your podcasts or watch

on YouTube.com slash your rich BFF. We're back with Profty Markets. There's a shake-up happening in the media industry that hits especially close to home for us. James Murdoch is acquiring the Vox Media Podcast Network, along with New York Magazine and the Vox News site, in a deal reportedly worth around $300 million. And who is at the center of this very exciting and hot new media deal? Scott Galloway and kind of Ed Elson, this show. We're a part of this in a way. Scott, I mean, what do you make of this deal?

What do you know? What can you share? Is this going to change our business? Any thoughts? So James Murdoch, which is sort of the, I don't know, the softer, cuddly or moderate Murdoch, has decided using his, he owns Stakes in Tribeca Film Festival, the bulwark, Art Basel.

He's basically purchased New York Magazine and the podcast, the Vox Media Podcast Network. The third part of the business, which is some of their sites, Vulture, Eater, SB Nation, they do well, but it's a difficult business. Those are going to remain independent for now. My guess is they'll get sold off pretty soon.

So kind of the story of Vox was 10 years ago, or eight years ago, people thought these digital media assets, alternative media were the future, and these guys raised a lot of money and went out and started kind of this new generation of hip media, right? And people were excited about it. So BuzzFeed, Food 52, CNA advice, Mike, mashable.

And just to give you a sense, what's happened is basically Google and meta decided, erected these toll booths, and it basically sucked all the oxymour. out of the room by diverting traffic away from these sites or charging them a lot for it. And these slowly but surely these alternative media companies have become less economically viable. BuzzFeed went out of business. Food 52 sold some assets.

Food 52 lost 96% of its values. C-Net 94%. Vice ultimately declared bankruptcy. Mike lost 95%. Mashable lost 80%. And essentially what Jim and the CEO Vox did was said, I'm going to aggregate some kind of great assets, and then I'm going to spack it and take it public at a billion dollar valuation, which was the peak valuation there. It didn't work. The market soured on

these assets, and basically Vox, to a certain extent, was a company that aggregated assets that had negative synergy. And Jim is a smart guy. What he did is he decided to kind of bust the company into three units. One was New York Magazine, which I would describe as a trophy asset. It does okay. It punches well above its weight class. It's kind of the HBO of magazines. It does well. They consistently are kind of water cooler conversation, and the editor, the editor-in-chief there, David Haskell, is a very bright guy and it's always finding amazing new reporters. But it's a magazine business. It does better than most magazines, but it's like the Jets. It doesn't make any money, but there's always someone who wants to own it, is the way I would describe it. Trophy asset.

The websites do okay, but it's a difficult business. They, do, you know, okay. And it ended up that the business that Jim Murdoch wanted or James Murdoch wanted was the podcasts. And the podcasts are essentially growing. Podcasts are growing about 17% a year, as a, you know, they grew 18% year over year, reaching 2.9 billion. That's a 27x growth over the last 10 years. In 2024, you saw ad revenue growth at 26%. And now 70% of Americans, they 12 plus have listened to a podcast and 51% of watch one and 55% are now monthly consumers and two-thirds of 12 to 34s, which advertisers love, have listened to or watched a podcast. The average podcast listeners, 34 versus the cable news.

You know, the business is actually growing as fast or faster than some of the tech titans we talk about, and it's ad-supported. So it's the fastest growing ad-supported medium outside of meta and alphabet. And essentially, supposedly, where what Murdoch paid the most for, what drove this value, I don't know this, but supposedly he paid about 300, somewhere between 300 and 350 million for the magazine and the podcasts. But supposedly the crown jeweler, what he really wanted was the pods. And so this is, you know, I've gotten to know him a little bit. I knew him before. He seems like a, you know, I'm not just saying this because he's a, You know, he's technically the owner or the boss now. You know, Prophegey is an independent company. We have a deal where we sell our advertising through Vox, and they take a percentage of the revenues,

but we're essentially an independent company. Pivot is co-owned by Kara Scott and Vox, which means no one has control. Everyone just has veto authority. We're like the European Union with. We had, you know, I don't mean to sound self-important, but we could have vetoed this transaction. And we didn't because we like Jim Benkoff.

I would say we like the gyms and we like James Murdoch. we wanted to see this deal go through, and we think it makes a lot of sense. But, you know, this is, this is Jim and Vox, we're kind of on the last helicopter out of Saigon, and that is our peer group has been crushed, and Jim, to his credit,

made a big investment in podcasts, which have grown really nicely. I don't know what else to say about it. Do you have any questions, Ed? Any thoughts on the snacks or health insurance? Yeah. Well, I think one big question for a lot of people is who is James Murdoch. We know he's Rupert Murdoch's son. We know that Rupert Murdoch is the infamous, notorious owner, creator of some of the most iconic conservative media companies. And his son is now the owner of the company that is our advertising partner. Who is James Murdoch? I'm trying to figure out which kid he would be. I think he's, well, okay, he's, he's, I hate to assign him this way, but he's kind of the lefty Murdoch kid.

I would describe him as center left. I think he's the only person that could get this deal done at Vox, because I think the others are kind of squarely seen as pretty right-leaning or Loughlin got the keys of the kingdom at Fox. I think the daughter Elizabeth Murdoch is off just enjoying herself and producing films. She's talented. She's a creative. But James is, he wants to make a name for himself. He's bought New York Magazine. He's about this podcast. He's bought great assets.

Tribeca Film Festival is a good asset. I think it's a little bit dusty, but I think he's going to try and rejuvenate it. And I think that Art Basel is a global brand that my guess is probably a bigger brand than it is a business. But I would imagine that as all sorts of opportunities. But he's considered, he's got a good reputation. he's known as being someone who's smart, digitally savvy. And you get the sense, I've known him for a couple of years. Quite frankly, you get the sense that he understands his good fortune and privilege and is a nice man.

So I don't know him well. I know him. But if we were going to ask for, what would you want? You'd want a benign billionaire. And that's what this guy is. And he's smart. So, but we had an all, not in all hands, but we talked to some people. people at Prop G, and people obviously understand we're concerned and want to know what this means,

quite frankly, it doesn't mean a lot for us because nothing is going to be, as far as I know, that different. But he wanted to make sure we were happy with Vox because we're a big component, you know, combined Privet and ProvG are a very large, important part of Vox. And when I talk to Reuters and everyone was calling me, I'm like, you know, guys, I think Kara and I probably could have fucked up this deal, and we didn't because we like Jim Bancoff and we like James Murdoch. And we were told that everything would be the same and the economic interests are aligned here. We have a great partnership. Things work. Is there some synergy? We always overestimate synergy. Maybe we do, I don't know if Ed Elson does live podcast or Mark Basel. I don't know, but maybe, maybe not.

That's the synergy. Maybe. Jim Merck, do you hear that? Live from Alt Basel, Prof G. Markets. Yeah, I don't know. I'm pretty sure it means I get to meet Brett Baer or my next wife is Megan Kelly. There's something's got to happen here. There's money in that in some way. There's something, something's going on. So like, I mean, just so people are clear, this guy, James Murdoch, Karab put it the other day that he's been described as the woke Murdoch, which I thought was quite funny. This guy is not kind of in the same camp as the rest of the family. which sort of is probably interesting to people because a lot of people probably think that similar to what we saw with Paramount and David Ellison, maybe this guy who's sort of in the Trump camp is taking over all of these historically more left-leaning or maybe just less conservative media outlets. That's not what's happening here, despite the fact that his name is Murdoch.

In terms of what it changes for our business, it actually changes nothing because, as Scott mentioned, We're an independent company in Vox Media is our advertising partner, so they help us sell our ads, and this guy now owns the company that helps us sell our ads. It also means that we're going to be in the same studio. I mean, so far, what we've been told is that literally nothing is going to change. I think the question that is worth exploring is, why is James Murdoch interested in this? Why does he want to buy this advertising company, essentially, which is Vox Media? There's New York Mag, which is a trophy asset, so maybe that would be fun.

And then there's the Vox Media Podcast Network. And the question is, really, is he buying it because it's fun, as we often talk about, with media assets? Because as you talked about, David Ellison, if you buy those assets, then maybe you get to go to the Oscars After Party, etc. Or is it that the Vox Media Podcast Network is a genuinely good business, and there is opportunity that he sees there, something that he could do to the Blocustor podcast Network, is a genuinely good business. and there is opportunity that he sees there, something that he could do to the business, maybe step in as kind of an activist, and turn on some revenue that didn't exist before.

I don't know. What do you think? Well, he bought it because he has daddy issues. I mean, he sees a future in podcasting. Look, okay, there's two assets here, and they're totally different. New York Magazine is a trophy asset. It's ego. Yeah. But I don't think he wanted that.

Unless you know otherwise. No, he wanted it. He wanted it. He wanted it. Yeah, he wanted it. And I think they would have sold. There's three basic businesses here. There's the online digital media property businesses, Eater Vulture, that stuff.

And then there's the podcast and there's the magazine. And James wanted the magazine and the podcast. And he might have a vision. I can see maybe New York Magazine combining with, you know, there's probably something there. But I personally think anybody who buys magazines right now, it's ego. I just think these are trophy properties. I have a hard time believing in New York Magazine is going to be a big business. It continues to be a great, you know, a great property doing really good journalism. I think that James is actually quite civic-minded. So he was probably drawn to their ability to punch out really relevant stories that have influence. You know, Lorraine Powell Jobs, the Atlantic probably isn't a fantastic business, but I think she gets a lot of psychic reward around. you know, financing and running a good business that also has a lot of cultural relevance. But it's not from a shareholder perspective. My guess is, like I said, billionaire Republicans

by football teams, billionaire Democrats buy media properties or magazines or newspapers, because this is not, you know, God, I really want to get into the magazine business said no one ever right now. But when you show up and you own New York Magazine, you're kind of relevant. His father used to own it. So I think there's a little bit of like what comes around goes around. It's a good business. You can sort of see some synergy with Tribeca Film Festival and Arbazel. The crown jewel here is the podcast business because podcasting is growing. And it's the fastest growing ad business. He's kind of built in a factory of who we would want to buy the business. Jim's sticking around, which we're happy about. Jim is like the nicest. I mean, this may come as a surprise to you, but I'm not easy to

And, you know, not once. Think about all the stupid shit I say on this show, the offensive shit, how much I get it wrong. Jim has never called me once and said, hey, dial it back, or try to avoid shit posting, zip recruiter. Or maybe you don't need to, or maybe you don't need to make fun of Tesla quite as much. for recruits, just catches straight on this second. Maybe don't, you know, say that Cheryl Sandberg has done more damage to young people than any person in history. Like, maybe don't do that, right? So he has not once ever, his attitude is he calls and he says, how can I be helpful?

And so I just wanted to, you know, when I talked to James, he wanted to make sure we were happy with Vox and the relationship was going to continue. And I said, yeah, I'm really, I'm really happy. until, you know, that isn't until Comcast or Anthropic agree to buy us for a crazy amount of money, then I'm out of this fucking taco stand. I mean, I'm super committed to the relationship. Right, I'm super committed to the relationship. All right, let's wrap this up. Any advice to James Murdoch, what could he do to make this not just a trophy asset,

but an extremely profitable, high-growth asset? What's the secret source that he needs to inject into the Vox Media Podcast? cost network. I have such a, if I were James Murdoch, I'd be in Abitha right now with a bunch of Eastern European women. If I had those billions, I'd be living a much different life, Ed. Profound. So I can't tell him what to do because he's clearly much different than me. What would I do? Make sure that I would probably use this as a platform to go roll up a bunch of other podcasts, that's that. I think the plan podcasting is what Martin Sorrell did in the ad business in the 80s and 90s. And that is, there are a lot of good businesses, you know, you don't even around these businesses, but Martin Pyrriss started a company.

Ogilvy and May there, Fallon McGillacott, Wheehan Kennedy, which remained independent, all these little agencies, Jay Walter Thompson. And the problem with these things was they weren't saleable assets because there was too much keyman risk. if Martin Puris left Amarotti Puris and they had one big account, BMW, if you bought the company, it was just too much risk. And so what he did was he went to all these companies and said, I will give you seven times your EBITA. You will sign very onerous employment contracts. And if I sign up enough of you, I'm going to be able to take it public and it'll trade it 12 times. So there's an arbitrage because you could say to the markets, Martin Puris and Shelley Lazarus aren't the business because I own 12 or 15 of the agencies.

And if anyone leaves or the biggest client goes away, we're still okay because we've got 12 or 13 other agencies. The play here is the following. Go get a bunch of podcasts, whether it's Huberman Lab or Modern Wisdom or Plain English or Mel Robbins or Smartless and roll them up such that there's no key man risk or key woman risk. And you can get some synergy on the back end, although you always overestimate that,

and then either take the thing public or sell it for a lot of money or just have the cash flows. But this is, it's a business that's growing. It's a business that, you know, the thing about podcasting is that there are 1.6 million podcasts, 600,000 produce a podcast every week. Generously 600 make money.

So what you're talking about is 0.1%, 99.9% unemployment in podcast. Now, granted, a lot of people do it for psychic income or they do it to drive business to the McKinsey Business Transformation Group, so they have a, you know, boring a shit podcast with someone with a Northern European accent and a PhD. But the top 50 podcasts or the top 100, he should try and start two or three with celebrities and he should go buy five or six of the top 50 and say, you really have no liquidity strategy unless we go WPP here. and that is we combine scale and get big. I would use this platform right now as a platform to go roll up a bunch of other podcasts

and see if I can find synergy between New York Magazine and Tribeca Film Festival and Arbazel and also just be really, really good to the talent. That's what I would do. And I would invite them on your yacht. I would invite them to every premiere at the Tribeca Film Festival.

That's what I would do. if I were, if I were James Murdoch. It's very important to be very kind of the talent. 100%. Otherwise, they leave. Or they just stopped doing a good job. Well, that happened a while ago. Let's take a look at the week ahead.

We'll see consumer confidence for May and inflation data from the Personal Consumption Expendishes Index for April. We'll also see earnings from Salesforce, Marvell and Dell. Any predictions, Scott? Oh, God, I'm going to hate this one. This thing does not price it to, trillion dollars. At some point, people have got to put the crack pipe down. Yeah, my prediction was going to be similar. My prediction is that SpaceX stock collapses within 12 months of the IPO.

I don't know when it's going to happen. Oh, that's an easy one. But collapse as to what? I don't know. I just think it will collapse in a big way. Collapse in a big way. That's not, that's not, that's not, that's not specific enough. Oh, no, no, no. Collapse in a big way is very, very specific and why people come to the show for that type of robust analysis. Collapse in a big way. Are you applying numbers to each of your predictions? I don't think so.

I think this thing is a $600 billion company. If you look at generously at the windup of all of it, I think they're going to have to cut back on the capbacks at XAI. I wouldn't be surprised if they end up closing that thing down at some point. Yeah, I think that's, I think a safe bet is within six to 12 months, it's sub a trillion dollars. And if interest rates keep going up, and we finally, you know, as Buffett said, the tide goes out for the first time, yeah, this, I mean, saying it crashes to $500 billion, that would make it what? The ninth most valuable company

in the world. So, yeah, look, every time, the thing that, because we've had such a bull market for 17 years, people forget that almost every one, one of the companies that we look to now in the Magnificent 10 is at some point been down 60, 70, 80% and a 24-month period. And so I think it's a fairly safe bet, assuming that if interest rates maintain this trajectory, the quagmire in Iran, the fact that we're just so due for some sort of correction, that if this thing manages to get out at anything close to $2 trillion, within the next 24 to 36 months, you see at some point peak to trough down 70 or 80%. Okay. This episode was produced by Claire Miller and Alison Weisson, engineered by Benjamin Spencer. Our video editor is

Jorge Carty. Our research team is Danjalan, Isabella Kinsel, Chris Nadanahue and Mia Silverio. Jake McPherson is our social producer. Drew Burroughs is our technical director and Catherine Dillon's our executive producer. Thank you for listening to Profty Markets from Profty Media. If you liked what you heard, give us a follow and tune in on Friday for a fresh take on the markets live from San Francisco. The tour is happening. It's on, baby. Role models showing up. my role model, Ed, my hero.